Stock shortage demand fails where inventory verification is incomplete and lot-wise records remain unexamined

Duty demand based on alleged stock shortage could not be sustained on an incomplete inventory exercise where the assessee disputed the lot-wise correlation, duplication in stock recording, and the treatment of related records. The stock shortage had been worked out on assumptions and presumptions, without properly examining the assessee's specific objections or undertaking fresh verification of the stock position. The duty demand and consequential penalty were therefore not finally upheld, and the matter was remanded to the original authority for reconsideration of the assessee's submissions and the record.

---

---

Issues: Whether the duty demand and penalty based on alleged shortage of stock could be sustained when the assessee disputed the inventory exercise and claimed that excess stock and lot-wise records had not been properly correlated.

Analysis: The stock calculations were found to have been worked out on the basis of assumptions and presumptions, while the assessee's specific objections regarding lot numbers, apparent duplication in the inventory, and the need to examine related records had not been considered by the lower authorities. In such circumstances, the quantified shortage could not be accepted without a fuller examination of the record and fresh verification of the stock position.

Conclusion: The duty demand and consequential penalty were not finally upheld and the matter was remanded to the original authority for fresh consideration of the assessee's submissions.

---